Community Bankers of Iowa Monthly Banker Update September 2013 | Page 18

Creighton U N I V E R S I T Y Main Street Economic Survey Rural Mainstreet Economy Grows: Farm Equipment Sales Decline Ernie Goss riculture commodity prices, while helpful to livestock producers, is pushing farmers to pullback on their equipment purchases. This trend will begin slowing overall rural growth in the months ahead,” said Goss. Banking: The loan-volume index remained above growth neutral for the month at 70.5, though it was down from July’s 75.7. The checking-deposit index slipped to 51.7 from July’s 53.7 while the index for certificates of deposit and other savings instruments increased to a very weak 43.5 from July’s 42.0. This month bankers were also asked when the Federal Reserve should alter or end their $85 billion per month bond buying program named quantitative easing 3 (QE3). “Approximately 15.8 percent think the program should conclude by the end of 2013. Another 5.3 percent support terminating QE3 by the end of 2014, 56.1 percent indicated the Fed should begin tapering purchases next month, and 22.8 percent recommend keeping the program ‘as is’ until the unemployment rate declines below 7 percent,” said Goss. Also this month bankers reported on their major competitors for agriculture loans. Almost nine of 10, or 88.3 percent, indicated that Farm Credit was their biggest competitor. Another 8.3 per- August Survey Results at a Glance: • Rural Mainstreet Index indicates rural economy expansion slows slightly. • Farmland price growth slowed for the eighth time in past nine months. • Farm equipment sales declined for the first time since 2009 with an August index below growth neutral. • Approximately one-fifth of farmland sales made to nonfarmer investors. • Almost nine in 10 bankers named Farm Credit as their major competitor for farm loans. While growth for the Rural Mainstreet economy remains healthy, it slowed a bit in August, according to the monthly survey of bank CEOs in a 10-state area. Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100 with 50.0 representing growth neutral, slipped to 55.8 from July’s 57.3, but was well ahead of last August’s 47.1. “Last year at this time the drought was weighing on the Rural Mainstreet Economy. This year, weaker agriculture commodity prices are having a dampening impact on the farm economy and businesses tied to agriculture. Even so, the economy continues to expand at a reasonable pace according to bank CEOs,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University. Farming: The farmland-price index declined for the eighth time in the past nine months. The August index fell to 55.8 from 58.2 in August. “Our farmland-price index has been above growth neutral since February 2010. However, lower farm commodity prices are slowing growth in farmland prices. I expect farmland price growth to continue to weaken as agriculture commodity prices soften,” said Goss. This month bankers were asked to estimate the share of farmland sales going to nonfarm investors. Banking leaders indicated that approximately one-fifth of sales are going to non-farm investors, the same as this spring when the same question was asked. In some areas of the region, investor purchases are down dramatically. For example, Fritz Kuhlmeier, CEO of Citizens State Bank in Lena, Ill., said, “Local farmers have completely driven the nonfarmer investors out of the farmland market by elevating the prices over returns investors demand.” Furthermore, the inventory of available farmland is down significantly. According to Jim Stanosheck, CEO of State Bank of Odell, in Odell, Neb., “There is very little farm real estate available in the area.” Farm equipment sales also softened for August with the index moving below growth neutral for the first time since 2009. The index slumped to 49.2 from 50.0 in July. “I am concerned that agriculture equipment dealers may find themselves with higher and higher unsold inventory. The direction we are seeing in ag- throughout the upper Midwest • Participation loans (commercial, agricultural, construction, operating lines and term loans) • Bank stock & ownership loans • Bank building financing • Business & personal loans for bankers • Multi-family long-term permanent financing Call us for a quick response, competitive rates and flexible underwriting. Contact Gary Keller at 701.371.3355 or [email protected] Working with community banks Member FDIC 5406 15 CBI Banker Update . September 2013 3100 13th Ave. S. | Fargo, ND